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EXHIBIT 4.4
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED,
SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF THIS NOTE, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT THIS NOTE MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS.
THIS NOTE IS SECURED AS PROVIDED HEREIN.
DSL ENTERTAINMENT GROUP, INC.
12% SECURED REDEEMABLE NOTE
MARCH __, 1996
$100,000 PRINCIPAL AMOUNT NEW YORK, NEW YORK
DSL ENTERTAINMENT GROUP, INC., a California corporation (the
"Company"), for value received, hereby promises to pay to , with an address at [
], or registered assigns (the "Holder"), the principal amount of One Hundred
Thousand Dollars ($100,000) on the earlier to occur of the Maturity Date (as
defined below) and the Redemption Date (as defined below), and to pay interest
on the unpaid principal balance hereof at the rate (calculated on the basis of a
360-day year consisting of twelve 30-day months) of 12% per annum, compounding
quarterly, from the date hereof until the earlier to occur of the Maturity Date
and the Redemption Date. Accrued interest on the unpaid principal balance hereof
shall be payable on the earlier to occur of the Maturity Date and the Redemption
Date. In no event shall any interest to be paid hereunder exceed the maximum
rate permitted by law. In any such event, this Note shall automatically be
deemed amended to permit interest charges at an amount equal to, but no greater
than, the maximum rate permitted by law.
This Note is one of a series of Notes being issued by the Company
in an aggregate principal amount not to exceed $2,500,000.00 denominated "12%
Secured Redeemable Notes" (the "Notes") and the holder thereof is entitled to
the benefits of a Security Agreement, dated as of March 6, 1996 between the
Company and the individuals and entities who are (or will be) signatories to
such agreement. The Notes have been offered and sold by the Company in an
offering of securities exempt from registration under the Securities Act of
1933, as amended (the
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"Securities Act"), pursuant to the Confidential Private Placement Memorandum,
dated February 7, 1996 (the "Memorandum").
SECTION 1 PAYMENTS.
(a) Principal of, and any accrued and unpaid interest on, this
Note shall be due and payable in full on the earlier to occur of the Maturity
Date and the Redemption Date. The "Maturity Date" shall be December 31, 1996.
(b) Interest on this Note shall accrue from the date of issuance
hereof, to, but excluding the earlier to occur of the Maturity Date and the
Redemption Date and shall be payable in arrears. Accrued and unpaid interest not
paid when due and payable shall be capitalized.
(c) If the Maturity Date or the Redemption Date would fall on a
day that is not a Business Day (as defined below), the payment due on such date
will be made on the next succeeding Business Day with the same force and effect
as if made on the Maturity Date or Redemption Date, as the case may be.
"Business Day" means any day which is not a Saturday or Sunday and is not a day
on which banking institutions are generally authorized or obligated to close in
the City of New York, New York.
(d) The Company may, at its option, prepay all or any part of the
principal of this Note, without payment of any premium or penalty, upon 10 days
prior notice to the Holder. All payments on this Note shall be applied first to
accrued and unpaid interest hereon and the balance to the payment of principal
hereof.
(e) Payments of principal of, and interest on, this Note shall be
made by check sent to the Holder's address set forth above or to such other
address as the Holder may designate for such purpose from time to time by
written notice to the Company, in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
(f) The obligations to make the payments provided for in this
Note are absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment, or adjustment whatsoever. The Company
hereby expressly waives demand and presentment for payment, notice of
non-payment, notice of dishonor, protest, notice of protest, bringing of suit,
and diligence in taking any action to collect any amount called for hereunder,
and shall be directly and primarily liable for the payment of all sums owing and
to be owing hereon, regardless of, and without any notice, diligence, act or
omission with respect to, the collection of any amount called for hereunder.
SECTION 2 RANKING OF NOTE.
(a) The payment of the principal of, and interest on, the Notes
is secured by a first lien on all of the Company's right, title, and interest in
and the assets identified in that certain Security Agreement, dated as of March
6, 1996, between the Company and the individuals and entities indicated therein.
(b) Until the payment in full of all amounts of principal of, and
interest on, the Notes, and all other amounts owing under the Notes, all
payments to be made with respect to the
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principal of, or interest on, and other amounts due with respect to indebtedness
other than, the Notes shall be made on a pari passu basis.
SECTION 3 COVENANTS.
The Company covenants and agrees with the Holder that, so long as
any amount remains unpaid on the Notes, unless the consent of the majority of
all of the Holders is obtained, the Company:
(a) shall not pay any dividend or make any distribution on, or
purchase, redeem, or retire, any shares of its capital stock or any warrants,
options, or other rights to reacquire any such shares, except that the Company
may pay dividends payable solely in shares of its capital stock.
(b) shall not change its primary line of business and shall use
the proceeds from the issuance of the Notes only as set forth in the Memorandum.
(c) shall not (i) enter into any merger or consolidation, (ii)
liquidate, wind up its affairs or dissolve, or (iii) except in the ordinary
course of business, convey, sell, lease, transfer or otherwise dispose of, or
purchase or acquire, any business, assets or other property.
(d) shall not, directly or indirectly, enter into any transaction
with or for the benefit of an affiliate (other than reasonable compensation, for
services as an officer, director, or employee).
(e) shall not in any manner increase the compensation of its
existing officers and directors from the levels in effect on the date of
issuance of this Note.
(f) shall deliver to each Holder:
(i) as soon as available, and in any event within 45 days
after the end of each of the first three quarterly fiscal periods of each fiscal
year of the Company, statements of income, retained earnings, and cash flow of
the Company, for such period and for the period from the beginning of the
respective fiscal year to the end of such period, and the related consolidated
balance sheet of the Company and its subsidiaries as at the end of such period
setting forth in the case of each such statement in comparative form the
corresponding figures for the corresponding period in the preceding fiscal year,
accompanied by a certificate of the chief financial officer of the Company,
which certificate shall state that (A) such financial statements fairly present
in all material respects the financial position and results of operations of the
Company and its subsidiaries, all in accordance with generally accepted
accounting principles consistently applied, and (B) no Default (as hereinafter
defined) has occurred and is continuing or, if any Default has occurred and is
continuing, a description thereof in reasonable detail and of the action the
Company has taken or proposes to take with respect thereto;
(ii) as soon as available and in any event within 90 days
after the end of each fiscal year of the Company, consolidated statements of
income, retained earnings, and cash
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flow of the Company for such fiscal year, and the related consolidated balance
sheet of the Company and its subsidiaries as at the end of such fiscal year,
setting forth in the case of each such statement in comparative form the
corresponding figures for the preceding fiscal year, and accompanied by a
certificate of the chief financial officer of the Company stating that no
Default has occurred and is continuing or, if any Default has occurred and is
continuing, a description thereof in reasonable detail and of the action the
Company has taken or proposes to take with respect thereto;
(iii) promptly after the Company shall obtain knowledge of
such, written notice of all legal or arbitral proceedings, and of all
proceedings by or before any governmental or regulatory authority or agency, and
each material development in respect of such legal or other proceedings,
affecting the Company and its subsidiaries, except proceedings which, if
adversely determined, would not have a material adverse effect on the Company
and its subsidiaries taken as a whole; and
(iv) promptly after the Company shall obtain knowledge of
the occurrence of any Event of Default (as hereinafter defined) or any event
which with notice or lapse of time or both would become an Event of Default (an
Event of Default or such other event being a "Default"), a notice specifying
that such notice is a "Notice of Default" and describing such Default in
reasonable detail, and, in such Notice of Default or as soon thereafter as
practicable, a description of the action the Company has taken or proposes to
take with respect thereto.
SECTION 4 EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an
event of default (an "Event of Default"):
(a) A default in the payment of the principal on any Note, when
and as the same shall become due and payable.
(b) A default in the payment of any interest accrued on any Note,
when and as the same shall become due and payable, which default shall continue
for five business days after the date fixed for the making of such interest
payment.
(c) A default in the performance, or a breach, of any of the
covenants of the Company contained in Sections 1 or 3 of this Note.
(d) A default in the performance, or a breach, of any other
covenant or agreement of the Company in this Note and continuance of such
default or breach for a period of 30 days after receipt of notice from the
Holder as to such breach or after the Company had or should have had knowledge
of such breach.
(e) Any representation, warranty, or certification made by the
Company pursuant to this Note shall prove to have been false or misleading as of
the date made in any material respect.
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(f) A final judgment or judgments for the payment of money in
excess of $50,000 in the aggregate shall be rendered by one or more courts,
administrative or arbitral tribunals, or other bodies having jurisdiction
against the Company and the same shall not be discharged (or provision shall not
be made for such discharge), or a stay of execution thereof shall not be
procured, within 60 days from the date of entry thereof and the Company shall
not, within such 60-day period, or such longer period during which execution of
the same shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal.
(g) The entry of a decree or order by a court having jurisdiction
adjudging the Company a bankrupt or insolvent, or approving a petition seeking
reorganization, arrangement, adjustment, or composition of, or in respect of,
the Company, under federal bankruptcy law, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency, or other similar
law, and the continuance of any such decree or order unstayed and in effect for
a period of 60 days; or the commencement by the Company of a voluntary case
under federal bankruptcy law, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency, or other similar law, or the
consent by it to the institution of bankruptcy or insolvency proceedings against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under federal bankruptcy law or any other applicable
federal or state law, or the consent by it to the filing of such petition or to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator, or
similar official of the Company or of any substantial part of its property, or
the making by it of an assignment for the benefit of creditors, or the admission
by it in writing of its inability to pay its debts generally as they become due,
or the taking of corporate action by the Company in furtherance of any such
action.
Notwithstanding the foregoing, no Event of Default shall be called
unless the holders of 75% of the outstanding Notes notify the Company that they
have accelerated the Notes as herein provided.
SECTION 5 REMEDIES UPON DEFAULT.
(a) Upon the occurrence of an Event of Default referred to in
Section 4(g), the principal amount then outstanding of, and the accrued and
unpaid interest on, this Note shall automatically become immediately due and
payable without presentment, demand, protest, or other formalities of any kind,
all of which are hereby expressly waived by the Company. Upon the occurrence of
an Event of Default referred to in Section 4(a) or (b), the Holder, by notice in
writing given to the Company, may declare the entire principal amount then
outstanding of, and the accrued and unpaid interest on, this Note to be due and
payable immediately, and upon any such declaration the same shall become and be
due and payable immediately, without presentation, demand, protest, or other
formalities of any kind, all of which are expressly waived by the Company. Upon
the occurrence of an Event of Default other than one referred to in Sections
4(a), (b), or (g), the Holders of not less than 50% in principal amount of the
then outstanding Notes (excluding any Notes held by or for the account of the
Company or any affiliate of the Company) may declare the principal amount then
outstanding of, and the accrued interest on, the Notes to be due and payable
immediately, and upon such declaration the same shall become due and payable
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immediately, without presentation, demand, protest, or other formalities of any
kind, all of which are expressly waived by the Company.
(b) The Holder may institute such actions or proceedings in law
or equity as it shall deem expedient for the protection of its rights and may
prosecute and enforce its claims against all assets of the Company, and in
connection with any such action or proceeding shall be entitled to receive from
the Company payment of the principal amount of this Note plus accrued interest
to the date of payment plus reasonable expenses of collection, including,
without limitation, attorneys' fees and expenses.
SECTION 6 TRANSFER.
(a) Any Notes issued upon the transfer of this Note shall be
numbered and shall be registered in a Note Register as they are issued. The
Company shall be entitled to treat the registered holder of any Note on the Note
Register as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to, or interest in, such Note on the part
of any other person, and shall not be liable for any registration of transfer of
Notes which are registered or to be registered in the name of a fiduciary or the
nominee of a fiduciary unless made with the actual knowledge that a fiduciary or
nominee is committing a breach of trust in requesting such registration or
transfer, or with the knowledge of such facts that its participation therein
amounts to bad faith. This Note shall be transferable only on the books of the
Company upon delivery thereof duly endorsed by the Holder or by his duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment, or authority to transfer. In all cases of transfer by an
attorney, executor, administrator, guardian, or other legal representative, duly
authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Note or Notes to the
person entitled thereto. This Note may be exchanged, at the option of the Holder
thereof, for another Note, or other Notes of different denominations, of like
tenor and representing in the aggregate a like principal amount, upon surrender
to the Company or its duly authorized agent. Notwithstanding the foregoing, the
Company shall have no obligation to cause Notes to be transferred on its books
to any person if, in the opinion of counsel to the Company, such transfer does
not comply with the provisions of the Securities Act and the rules and
regulations thereunder.
(b) The Holder acknowledges that he has been advised by the
Company that this Note has not been registered under the Securities Act, that
this Note is being issued on the basis of the statutory exemption provided by
Section 4(2) of the Securities Act or Regulation D promulgated thereunder, or
both, relating to transactions by an issuer not involving any public offering,
and that the Company's reliance thereon is based in part upon the
representations made by the original Holder to the Company. The Holder
acknowledges that he has been informed by the Company of, or is otherwise
familiar with, the nature of the limitations imposed by the Securities Act and
the rules and regulations thereunder on the transfer of securities. In
particular, the Holder agrees that no sale, assignment, or transfer of this Note
shall be valid or effective, and the Company shall not be required to give any
effect to any such sale, assignment, or transfer, unless (i) such sale,
assignment, or transfer is registered under the Securities Act, it being
understood that this Note is not currently
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registered for sale and that the Company has no obligation or intention to so
register this Note, or (ii) this Note is sold, assigned, or transferred in
accordance with all the requirements and limitations of Rule 144 under the
Securities Act, it being understood that Rule 144 is not available at the time
of the original issuance of this Note for the sale of this Note and that there
can be no assurance that Rule 144 sales will be available at any subsequent
time, or (iii) such sale, assignment, or transfer is otherwise exempt from
registration under the Securities Act.
SECTION 7 MANDATORY REDEMPTION.
The Notes shall be mandatorily redeemable by the Company,
automatically and without any action on the part of the Company or any Holder
thereof and without notice, upon the closing of the initial public offering
under the Securities Act of the common stock, without par value, of the Company.
The Company shall redeem the Notes by paying to the Holders thereof an amount
equal to the outstanding principal of, and accrued an unpaid interest on, the
Notes from February __, 1996 to, but excluding, the date of the redemption
thereof (the "Redemption Date"). All Notes redeemed pursuant to this Section 7
or otherwise acquired by the Company shall be canceled.
SECTION 8 MISCELLANEOUS.
(a) Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail, or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex, or similar telecommunications equipment) against receipt to the party to
whom it is to be given, (i) if to the Company, at its address at 12300 Wilshire
Boulevard, Los Angeles, California 90025, Attention: President, (ii) if to the
Holder, at its address set forth on the first page hereof, or (iii) in either
case, to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 8(a). Notice to the estate of any
party shall be sufficient if addressed to the party as provided in this Section
8(a). Any notice or other communication given by certified mail shall be deemed
given at the time of certification thereof, except for a notice changing a
party's address which shall be deemed given at the time of receipt thereof. Any
notice given by other means permitted by this Section 8(a) shall be deemed given
at the time of receipt thereof.
(b) Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction, or mutilation of this Note (and upon surrender of this
Note if mutilated), the Company shall execute and deliver to the Holder a new
Note of like date, tenor, and denomination.
(c) No course of dealing and no delay or omission on the part of
the Holder in exercising any right or remedy shall operate as a waiver thereof
or otherwise prejudice the Holder's rights, powers, or remedies. No right,
power, or remedy conferred by this Note upon the Holder shall be exclusive of
any other right, power, or remedy referred to herein or now or hereafter
available at law, in equity, by statute or otherwise, and all such remedies may
be exercised singly or concurrently.
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(d) This Note may be amended only by a written instrument
executed by the Company and the Holder hereof. Any amendment shall be endorsed
upon this Note, and all future Holders shall be bound thereby.
(e) This Note has been negotiated and consummated in the State of
New York and shall be governed by, and construed in accordance with, the laws of
the State of New York, without giving effect to principles governing conflicts
of law.
(f) The Company irrevocably consents to the jurisdiction of the
courts of the State of New York and of any federal court located in such State
in connection with any action or proceeding arising out of, or relating to, this
Note, any document or instrument delivered pursuant to, in connection with, or
simultaneously with this Note, or a breach of this Note or any such document or
instrument. In any such action or proceeding, the Company waives personal
service of any summons, complaint, or other process and agrees that service
thereof may be made in accordance with Section 8(a). Within 30 days after such
service, or such other time as may be mutually agreed upon in writing by the
attorneys for the parties to such action or proceeding, the Company shall appear
or answer such summons, complaint, or other process. Should the Company fail to
appear or answer within such 30-day period or such extended period, as the case
may be, the Company shall be deemed in default and judgment may be entered
against the Company for the amount as demanded in any summons, complaint, or
other process so served.
IN WITNESS WHEREOF, the Company has caused this Note to be executed and
dated the day and year first above written.
DSL ENTERTAINMENT GROUP, INC.
BY: ___________________________
DREW S. LEVIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of April __, 1996, made by DSL
Entertainment Group, Inc., a California corporation ("Company" or "Debtor"),
in favor of the parties named hereto on Exhibit 1 (collectively, the "Secured
Party").
W I T N E S S E T H:
WHEREAS, the Company is offering to sell up to $1.8 million of
Convertible Secured notes (the "Notes"); and
WHEREAS, as condition to receiving amounts in respect of such
Notes, the Company shall have delivered to the Secured Party for its benefit,
this Security Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein,
terms defined in the note are used herein as therein defined, and the following
terms shall have the following meanings (such meanings being equally applicable
to both the singular and plural forms of the terms defined):
"Affiliated Person" shall mean any Person which directly or indirectly
controls, is controlled by or is under common control with Company. For the
purposes of this definition, "control" (including with corresponding meanings,
the terms "controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that Person, whether
through the ownership of voting securities, by contract or otherwise.
"Collateral" shall have the meaning assigned to such term in Section 2
of this Security Agreement.
"Collateral Documents" shall mean all present and future notes,
security agreements, mortgages, deeds of trust, assignments, pledge agreements,
financial agreements, consents and other documents granting liens or other
security interests to Debtor and/or the Secured Party pursuant to this Security
Agreement including, without limitation, Copyright Mortgages, financing
statements, mortgages, subordination agreements, Laboratory Pledgeholder
Agreements, consents and/or waivers to be delivered pursuant to the various
Sections of Article V.
"Copyrights" shall mean all of Debtor's now owned or hereafter
acquired copyrights, copyright applications, copyright registrations and
copyrightable works and all renewals thereof and income, royalties, damages and
payments payable under or with respect thereto; together with any agreement
granting any right to use any copyright, copyright application, copyright
registration or copyrightable work.
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"Copyright Mortgages" shall mean the instruments of transfer pursuant
to which the Debtor (to the extent that Debtor is a copyright proprietor or
owns any rights under copyright) grants to Secured Party a copyright mortgage
and/or security interest in its interest in the United States, Canadian and/or
worldwide copyrights (including, but not limited to, the video cassette
distribution rights) to any Film Asset, substantially in the form of Exhibit A
attached hereto.
"Equipment" shall have the meaning set forth in Section 2(a) hereof.
"Event of Default" shall have the meaning set forth in Section 7.
"Film" shall mean any and every existing motion picture or
development project or other recording (or proposed recording) of moving images
by any means, manner, process or device now known or hereafter devised.
"Film Assets" shall mean all rights and interests granted to/acquired
or retained by Debtor in connection with or related to the distribution or
exploitation of, or otherwise respecting, any Film, owned by Debtor to be
designated pursuant to the Notes, but excluding all rights and interests in
connection with or related to the distribution or exploitation of, or otherwise
respecting any such Film outside of the Licensed Territory (as such term is
defined in the Notes), including, but not limited to: any distribution rights,
license rights, and rights as a sub-distributor or sub-licensee; all rights to
distribute, sub-license, copy, exhibit, transmit, broadcast, package, edit,
reformat, advertise or exploit a Film, in any and all media, and any
syndication, television or cable television rights; all of Debtor's copyrights
or interests in any copyright on or relating to such Film; and any of Debtor's
collateral, allied, subsidiary or merchandising rights appurtenant or related
to any Film, including but not limited to the following specific rights:
(a) all scenarios, screenplays and/or scripts at every
stage of the development of the Films;
(b) all common law and statutory copyright and other
rights in all literary and other properties ("Literary Properties") that form
the basis of the Films or which are or will be incorporated into the Films, all
component parts of the same Films consisting of the Literary Properties and
other properties, all motion picture rights in and to the story, all treatments
of said story and other literary material, together with all preliminary and
final screenplays used and to be used in connection with the Films, and all
other literary material upon which the Films are based or from which it is
adapted;
(c) all motion picture rights in and to all music and
musical compositions connected with the Films, including, without limitation,
all rights to record, re-record, produce, reproduce, or synchronize all of said
music and musical compositions in and in connection with motion pictures;
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(d) all exposed and/or delivered negative film, sound
tracks, positive prints, cutouts and trims connected with the Films, whether or
not in completed form or in some state of completion;
(e) all collateral, allied, subsidiary and merchandising
rights appurtenant or related to the Films now or hereafter owned or controlled
by Debtor, including, without limitation, the following rights: Literary
Properties, or the text or any part of the Literary Properties; all rights
throughout the world to broadcast, transmit and/or reproduce by means of
television (including, without limitation, free, commercially sponsored,
sustaining, subscription, cable and pay television) or by any process analogous
thereto, now known or hereafter devised, the Films; all rights to produce
primarily for television or similar use, by use of film or any other medium now
known or hereafter devised, a motion picture or series of motion pictures based
upon the Films, the Literary Properties, or any part thereof, including,
without limitation, any script, scenario or the like used in the Films; all
merchandising rights including, without limitation, all rights to use, exploit,
and license others to use and exploit any commercial tie-ups of any kind
arising out of or connected with the Literary Properties, the Films, the title
or titles of the Films, the characters of the Films or the Literary Properties,
or the names or characteristics of such characters and including further,
without limitation, any commercial exploitation in connection with or related
to the Films or the Literary Properties;
(f) all statutory copyrights, domestic and foreign,
obtained or to be obtained on the Films, together with any and all copyrights
obtained or to be obtained in connection with the Films or any underlying or
component elements of the Films, including, without limitation, all copyrights
on the property described in subparagraphs (a) through (e) of this definition,
together with the right to register for copyright, and all rights to renew or
extend such registration and the right to sue in the name of Debtor or in
Secured Party's name for past, present, or future infringements of copyrights;
(g) all insurance policies connected with the Films and
all proceeds which may be derived therefrom;
(h) all right to, and otherwise exploit and turn to account
the Films, the negatives, sound tracks, prints, and motion picture rights in
and to the Literary Properties, other literary material upon which the Films
are based or from which they are adapted, and such music and musical
compositions used or to be used in the Films;
(i) any and all sums, proceeds, money, products, profits,
or increases, and money profits or increases (as those terms are used in the
Uniform Commercial Code or otherwise) or other property obtained or to be
obtained from the distribution, exhibition, sale, or other uses or dispositions
of the Films or any part of the Films, including, without limitation, all
proceeds, profits, products, and increases, whether in money or otherwise, from
the sale, rental, or licensing of the Films and/or any of the elements of the
Films, including collateral, allied, subsidiary, and merchandising rights;
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(j) the dramatic, non-dramatic, stage, television, radio,
and publishing rights, title and interests in and to the Films, to the extent
owned by Debtor, and the rights to register for copyrights and renewals of same
therein;
(k) the title of the Films to the extent of Debtor's
right to use thereof, including, without limitation, rights protected pursuant
to any trademark, service mark, or unfair competition law, and/or the rules and
principles of law related to any other applicable statute, common law decision,
or other rule or principle of law;
(l) all of Debtor's rights which grant to any person any
right to acquire, produce, develop, reacquire, finance, release, sell,
distribute, lease, sublease, market, license, sublicense, exhibit, broadcast,
transmit, reproduce, publicize or otherwise exploit the Films or any rights in
the Films including, without limitation, all such rights pursuant to the any
distribution agreement or license agreement;
(m) with respect to the Films, all accounts and/or other
rights to payment which Debtor presently owns or which may arise in favor of
Debtor in the future, including, without limitation, any refund under a
completion guarantee, all accounts and/or rights to payment due from exhibitors
in connection with the distribution of the Films, and all accounts and/or
rights to payment arising from exploitation of any and all of the collateral,
allied, subsidiary, merchandising, and other rights in connection with the
Films;
(n) any and all "general intangibles" (as that term is
defined in the Uniform Commercial Code) of Debtor in connection with the Films
not elsewhere included in this definition, including, without limitation, any
and all general intangibles consisting of any right to payment which may arise
in the distribution or exploitation of any of the rights set out herein, and
any and all general intangible rights in favor of Debtor or Secured Party in
connection with the Films for services or other performances by any third
parties, including actors, writers, directors, individual producers, and/or any
and all other performing or non-performing parties or artists in any way
connected with the Films, any and all general intangible rights in favor of
Debtor or Secured Party relating to licenses of sound or other equipment in
connection with the Films, and licenses for photographic or other processes,
and any and all general intangibles related to the exhibition, distribution or
exploitation of the Films including general intangibles related to or which
grow out of the exhibition of the Films and the exploitation of any and all
other rights in the Films set out in this definition;
(o) any and all goods including inventory (as that term
is defined in the Uniform Commercial Code) which may arise in connection with
the creation, production, or delivery of the Films and which goods, pursuant to
any production or distribution agreement or otherwise, are owned by Debtor;
(p) each and all of the rights, regardless of
denomination, which arise in connection with the creation, production,
completion of production, delivery, distribution, or other
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exploitation of the Films, including, without limitation, any and all rights in
favor of Debtor and/or Secured Party, the ownership or control of which are or
may become necessary or desirable, in the opinion of Secured Party, in order to
complete production of the Films in the event that Secured Party exercises any
rights it may have to take over and complete production of the Films (which
shall be subject to the rights to take over and complete production of the
Films as Debtor may grant to other parties);
(q) any and all documents issued by any pledgeholder or
bailee with respect to the Films or with respect to any negatives, sound tracks
or prints (whether or not in completed form) connected therewith; and
(r) any and all rights of Debtor under contracts relating
to the production of the Films, including but not limited to all contracts
which have been delivered to Secured Party pursuant to this Security Agreement.
"General Intangibles" shall have the meaning set forth in Section
2(a)(viii).
"hereby," "herein," "hereof," "hereunder" and words of similar import
refer to this Security Agreement as a whole and not merely to the specific
section, paragraph or clause in which the respective word appears.
"Permitted Liens" shall mean each of the following:
(i) Liens for taxes, assessments or governmental
charges or claims the payment of which is not at the time required;
(ii) Statutory liens of landlords and liens of
carriers, warehousemen, mechanics, materialmen, film laboratories, sound
studios and other liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent or being contested in good faith;
(iii) Liens (other than any lien imposed by ERISA)
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);
(iv) Any attachment or judgment Lien, unless the
judgment it secures shall, within 45 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall have been
discharged within 45 days after the expiration of any such stay;
(v) Leases or subleases granted to others not
interfering with the ordinary conduct of the business of Company;
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(vi) Easements, rights-of-way, restrictions and
other similar charges or encumbrances not interfering with the ordinary conduct
of the business of Company; and
(vii) Liens in respect of the series "Simply
Style";
(viii) Liens granted to AMAE Ventures, Inc.; and
(ix) Liens granted to Joe Cayre, which are, in any
event, subordinated to the lien granted hereunder.
"Person" shall mean any entity, corporation, company, association,
partnership, joint venture, joint stock company, unincorporated organization,
trust, individual (including personal representatives, executors and heirs of a
deceased individual), nation, state, government (including governmental
agencies, departments, bureaus, boards, divisions and instrumentalities
thereof), trustee, receiver or liquidator.
"Proceeds" shall mean "proceeds," as such term is defined in section
9-306(1) of the UCC and, in any event, shall include, without limitation, (i)
any and all proceeds of any insurance, indemnity, warranty or guaranty payable
to Company from time to time with respect to any of the Collateral, (ii) any
and all payments (in any form whatsoever) made or due and payable to Company
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
governmental body, authority, bureau or agency (or any person acting under
color of governmental authority), (iii) any claim of Company against third
parties (A) for past, present or future infringement of any Patent or Patent
License in connection with the Collateral, or (B) for past, present or future
infringement or dilution of any Trademark or Trademark License in connection
with the Collateral, or for injury to the goodwill associated with any
Trademark, Trademark registration or Trademark licensed under any Trademark
License in connection with the Collateral, and (iv) any and all other amounts
from time to time paid or payable under or in connection with any of the
Collateral.
"Secured Obligations" shall mean all of the unpaid principal amount
of, and accrued interest on, amounts owing by Company to Secured Party under
the Notes or this Security Agreement.
"Security Agreement" shall mean this Security Agreement, as the same
may from time to time be amended, modified or supplemented and shall refer to
this Security Agreement as in effect as of the date such reference becomes
operative.
"Trademarks" shall mean all of the following now owned or hereafter
acquired by Company: (i) all trademarks, trade names, corporate names,
business names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature, now existing or
hereafter
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adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, and
(ii) all reissues, extensions or renewals thereof.
"UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of California; provided, however, in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of Secured Party's security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of California, the term "UCC" shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection or priority and
for purposes of definitions related to such provisions.
2. Grant of Security Interest. As collateral security for
the prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all the Secured Obligations and to
induce Secured Party to enter into the Notes and to make the Advances (as that
term is defined in the Notes) in accordance with the terms thereof, to the
extent necessary to enable Secured Party to exercise its rights under the
Notes, Company hereby assigns, conveys, mortgages, pledges, hypothecates and
transfers to Secured Party, for its benefit, and hereby grants to Secured
Party, for its benefit, a security interest in, all of Company's right, title
and interest in, to and under the following (all of which being hereinafter
collectively called the "Collateral"):
(a) shall mean all of the assets and property of every
kind of the Debtor, including all assets and property now owned and hereafter
acquired by the Debtor, whether tangible or intangible, wherever located or
situated, whether or not in possession of the Debtor, including but not limited
to: all of the Debtor's right, title and interest in and to every Film Asset
now owned or hereafter acquired, and all other assets and property whether now
owned or hereafter at any time acquired relating to any Film or any Film
Assets, including, but not limited to, all goods, accounts, contract rights,
general intangibles, equipment, ancillary rights, Copyrights, Physical
Properties, and the products thereof, proceeds thereon or income therefrom; all
common or preferred stock certificates, bonds or securities of every kind and
nature whatsoever owned by Debtor; all properties, rights and things of value
pertaining to any and all of the foregoing, and all products and proceeds of
and replacements for any and all of the foregoing, whether now in existence or
hereafter existing, made, acquired or produced; and further including, without
limitation, each and all of the following particular rights, assets and
properties of the Debtor:
(i) All machinery, electrical and electronic
components, equipment, fixtures, furniture, office machinery,
vehicles, trailers, implements and other tangible personal
property of every kind and description now owned or hereafter
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acquired by Debtor (including without limitation, all video
recording, transposition, duplication, viewing and other
electronic equipment used in the Debtor's business, all cameras
and other photographic, sound recording and editing equipment,
projectors, film developing equipment and machinery), and all
goods of like kind or type hereafter acquired by Debtor in
substitution or replacement thereof, and all additions and
accessions thereto (collectively hereinafter referred to as the
"Equipment"), and all rents, proceeds and products on or of the
Equipment, including without limitation, the rights to
insurance proceeds covering the Equipment;
(ii) The following personal property, whether now
owned or hereafter acquired: all inventions, processes,
formulae, licenses, patents, patent rights, trademarks,
trademark rights, service marks, service mark rights, trade
names, trade name rights, logos, indicia, corporate and
company names, business source or business identifiers and
renewals and extensions thereof, domestic and foreign, whether
now owned or hereafter used, acquired or developed, and the
accompanying good will and other like business property rights
relating to any aspect of the Debtor's business, and the right
(but not the obligation) to register claim under trademark or
patent and to renew and extend such trademarks or patents and
the right (but not the obligation) to sue in the names of the
Debtor (or any of them) and/or in the name(s) of the Secured
Party for past, present or future infringement of trademark or
patent (the foregoing being referred to as "Intellectual
Property");
(iii) All inventory of the Debtor, including,
without limitation all merchandise, raw materials, components,
parts, supplies, work-in-process, finished products intended
for sale, lease or other disposition, and packing and shipping
materials of every kind, nature and description, wherever any
of the same may be located and whether now owned or hereafter
developed, manufactured or acquired by the Debtor;
(iv) All deposits, cash and cash equivalents of
the Debtor, and all drafts, checks, certificates of deposit,
notes, bills of exchange and other writings which evidence a
right to the payment of money;
(v) All leasehold interests and other rights and
interests of the Debtor respecting the use or ownership of, or
title to any real property, including fee interests,
easements, licenses, all other rights and interests of any
kind;
(vi) All Film Assets, all of the Debtor's right
title and interest in and to Physical Properties and all
contract rights relating to any Film Assets, any and all sums,
proceeds, money, products, profits or increases, including
money profits or increases (as those terms are used in the
Uniform Commercial Code or otherwise)
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or other property obtained or to be obtained from the
exploitation of any Film Assets, rights and interests in and to
Physical Properties, and any other collateral, allied,
subsidiary and merchandising rights relating to any Film; and
any and all documents and the rights of the Debtor's thereunder
issued by any pledgeholder or bailee with respect to any
Physical Properties;
(vii) All insurance policies on which the Debtor is
named as an insured or additional insured or loss payee and
all proceeds which may be derived therefrom;
(viii) All contracts and accounts and/or other
rights to payment which the Debtor presently owns or which may
arise in favor of the Debtor in the future, including, without
limitation, any refund of the fees, advances or royalties paid
or prepaid, all accounts and/or rights to payment due from
third parties in connection with the distribution of
videocassette and from exploitation of any and all of the Film
Assets, including but not limited to all contracts and
accounts; and
(ix) Any and all "General Intangibles" (as that
term is defined in the applicable Uniform Commercial Codes)
not elsewhere included in this definition, including, without
limitation, any and all general intangibles consisting of any
right to payment of the Debtor which may arise in the
distribution or exploitation of any of the rights set out
herein, and any and all general intangible rights in favor of
the Debtor or the Secured Party for services or other
performances by any third parties. all of Company's right,
title, and interest in and to the Film Assets and further
including but not limited to related goods, accounts, contract
rights, general intangibles, equipment, copyrights,
trademarks, and any proceeds thereof or income therefrom. The
foregoing shall include, to the extent they are owned by
Company (it being understood that this definition does not
constitute a representation that each and all the various
rights listed are owned by Company), without limitation, the
scenario, screenplay or script upon which the Films are based,
all of the properties thereof, tangible and intangible,
whether now in existence or hereafter to be made or produced
and whether or not in possession of Company, and any rights
therein and thereto, of every kind and character, including,
without limiting the foregoing language, each and all of the
following particular rights and properties:
(b) To the extent granted under the Notes, the following
personal property, whether now owned or hereafter acquired,: (i) all of
Company's rights in and to the title of the Film Assets and the exclusive use
thereof including, without limitation, any and all rights protected pursuant to
trademark, service mark, unfair competition and/or other laws, rules or
principles of law or equity and (ii) all inventions, processes, formulae,
licenses, patents, patent rights, trademarks, trademark rights, service marks,
service mark rights, trade names, trade name rights,
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logos, indicia, corporate and company names, business source or business
identifiers and renewals and extensions thereof, domestic and foreign, relating
to the Film Assets, whether now owned or hereafter acquired, and the
accompanying good will and other like business property rights, and the right
(but not the obligation) to register claim under trademark or patent and to
renew and extend such trademarks or patents and the right, but not the
obligation, to sue in the name(s) of Company or the Secured Party or both for
past, present or future infringement of trademark or patent; and
(c) To the extent granted under the Notes, all cash and cash
equivalents of Company derived from or relating to the Film Assets and all
drafts, checks, certificates of deposit, bills of exchange and other writings
relating to the Film Assets which evidence a right to the payment of money and
are not themselves security agreements or leases and are of a type which is in
the ordinary course of business transferred by delivery with any necessary
endorsement or assignment whether now owned or hereafter acquired.
3. Representations and Warranties
The Company hereby represents and warrants that:
(a) Except for the security interest granted to Secured
Party pursuant to this Security Agreement and other Permitted Liens,
Company is the owner of the Collateral in which it purports to grant a
security interest hereunder, having good and marketable title thereto,
free and clear of any and all Liens.
(b) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in
any public office, except such as may have been filed by Company in
favor of Secured Party, pursuant to this Security Agreement or such as
relate to other Permitted Liens.
(c) Provided that appropriate financing statements are
properly filed in all jurisdictions in which the Collateral is located,
this Security Agreement is effective to create a valid and continuing
first priority lien on and first priority perfected security interest in
the Collateral with respect to which a security interest may be
perfected by filing pursuant to the UCC in favor of Secured Party, prior
to all other Liens except Permitted Liens, and is enforceable as such as
against creditors of and purchasers from Company. All action necessary
or desirable to protect and perfect such security interest in each item
of the Collateral has been duly taken.
(d) Company's principal place of business and the place
where its records concerning the Collateral are kept is located at the
address of Company set forth in Section 11 below, and Company will not
change such principal place of business or remove such records without
notifying Secured Party in advance, by prior written notice.
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4. Covenants. Company covenants and agrees with Secured Party
that from and after the date of this Security Agreement and until the Secured
Obligations are fully satisfied:
(a) Financing Statements and Further Documentation.
Company will join with Secured Party in the execution and filing
of such financing statement or statements in the form and
content reasonably required by Secured Party. Secured Party
will advance (and recoup as distribution expenses) all costs of
filing any financing, continuation or termination statements
with respect to the security interest created by this Agreement,
together with costs and expenses of any lien search reasonably
required by Secured Party, during the term hereof. At any time
and from time to time, upon the written request of Secured
Party, Company will promptly and duly execute and deliver any
and all such further instruments and documents and take such
further action as Secured Party may reasonably deem desirable to
obtain the full benefits of this Security Agreement and of the
rights and powers herein granted, including, without limitation,
using its reasonable best efforts to secure all consents and
approvals necessary or appropriate for the assignment to Secured
Party, of any License or Contract held by Company or in which
Company has any rights not heretofore assigned, and the filing
of any financing or continuation statements under the UCC with
respect to the liens and security interests granted hereby.
Company also hereby authorizes Secured Party to file any such
financing or continuation statement without the signature of
Company to the extent permitted by applicable law.
(b) Maintenance of Records. Company will keep and
maintain at its own cost and expense satisfactory and complete
records of the Collateral, including, without limitation, a
record of all payments received and all credits granted with
respect to the Collateral and all other dealings with the
Collateral. Prior to the occurrence of an Event of Default and
upon reasonable notice from Secured Party, Company shall permit
any representative of Secured Party to inspect such books and
records during normal business hours and will provide
photocopies thereof to Secured Party at Secured Party's expense.
(c) Indemnification. In any suit, proceeding or
action brought by Secured Party relating to the Collateral,
Company will save, indemnify and keep Secured Party harmless
from and against all expense, loss or damage suffered by reason
of any defense, set off, counterclaim, recoupment or reduction
of liability whatsoever of the obligor with respect thereto,
arising out of a breach by Company of any material obligation
with respect thereto, and all such obligations of Company shall
be and remain enforceable against and only against Company and
shall not be enforceable against Secured Party.
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(d) Compliance with Laws, etc. Company will
comply, in all material respects, with all acts, rules,
regulations, orders, decrees and directions of any governmental
authority, applicable to the Collateral or any part thereof or
to the operation of Company's business; provided, however, that
Company may contest any act, regulation, order, decree or
direction in any reasonable manner which shall not in the
reasonable opinion of Secured Party, adversely affect Secured
Party's rights hereunder or adversely affect the first priority
of its security interest in the Collateral.
(e) Payment of Obligations. Company will pay
promptly when due all charges imposed upon the Collateral or in
respect of its income or profits therefrom and all claims of any
kind (including, without limitation, claims for labor, material
and supplies) except as otherwise provided in the Notes.
(f) Compliance with Terms of Accounts, etc. In all
material respects, Company will perform and comply with all
obligations in respect of Accounts Receivable, Chattel Paper,
Contracts and Licenses and all other agreements to which it is a
party or by which it is bound.
(g) Limitation on Liens on Collateral. Company
will not create, permit or suffer to exist, and will defend the
Collateral against and take such other action as is necessary to
remove, any Lien on the Collateral except Permitted Liens.
(h) Limitations on Disposition. Company will not
sell, lease, transfer or otherwise dispose of any of the
Collateral, or attempt or contract to do so except in the
ordinary course of business.
(i) Continuous Perfection. Consistent with the
terms of the Notes, Company will not change its name, identity
or corporate structure in any manner which might make any
financing or continuation statement filed in connection herewith
seriously misleading within the meaning of section 9-402(7) of
the UCC (or any other then applicable provision of the UCC)
unless Company shall have given Secured Party at least thirty
(30) days' prior written notice thereof and shall have taken all
action (or made arrangements to take such action substantially
simultaneously with such change if it is impossible to take such
action in advance) necessary or reasonably requested by Secured
Party to amend such financing statement or continuation
statement so that it is not seriously misleading.
5. Secured Party's Appointment as Attorney-in-Fact.
(a) Subject to Paragraph (b) below, Company hereby
irrevocably constitutes and appoints Secured Party and any officer or
agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and
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authority in the place and stead of Company and in the name of Company
or in its own name, from time to time in Secured Party's discretion, for
the purpose of carrying out the terms of this Security Agreement, to
take any and all appropriate action and to execute and deliver any and
all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Security Agreement and, without limiting
the generality of the foregoing, hereby gives Secured Party the power
and right, upon the occurrence of an Event of Default not otherwise
cured, on behalf of Company, without notice to or assent by Company to
do the following:
(i) to ask, demand, collect, receive and give
acquittances and receipts for any and all moneys due and to
become due with respect to the Collateral and, in the name of
Company or its own name or otherwise, to take possession of and
endorse and collect any checks, drafts, acceptances or other
instruments for the payment of moneys due with respect to the
Collateral and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
reasonably appropriate by Secured Party for the purpose of
collecting any and all such moneys due under any Collateral
whenever payable and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise
deemed reasonably appropriate by Secured Party for the purpose
of collecting any and all such moneys due under any Collateral
whenever payable;
(ii) to pay or discharge taxes, liens, security
interests or other encumbrances levied or placed on or
threatened against the Collateral, to effect any insurance
called for by the terms of this Security Agreement and to pay
all or any part of the premiums therefor and the costs thereof;
and
(iii) (A) to direct any party liable for any payment
under any of the Collateral to make payment of any and all
moneys due, and to become due thereunder, directly to Secured
Party or as Secured Party shall direct (but only to the extent
of sums due to Secured Party from Company); (B) to receive
payment of and receipt for any and all moneys, claims and other
amounts due, and to become due at any time, in respect of or
arising out of any Collateral; (C) to sign and indorse any
invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other
Documents constituting or relating to the Collateral; (D) to
commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect
the Collateral or any part thereof and to enforce any other
right in respect of any Collateral; (E) to defend any suit,
action or proceeding brought against Company with respect to any
Collateral; (F) to settle, compromise or adjust any suit, action
or proceeding described above and, in connection therewith, to
give such discharges or releases as Secured Party may deem
reasonably appropriate; (G) subject to the Notes, to license or,
to the extent permitted by an applicable license, sublicense,
whether general, special or
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otherwise, and whether on an exclusive or non-exclusive basis,
any Patent or Trademark pertaining to the Collateral, on such
conditions, and in such manner, as Secured Party shall in its
discretion determine; and (H) generally to sell, transfer,
pledge, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though
Secured Party were the absolute owner thereof for all purposes,
and to do, at Secured Party's option and Company's expense, at
any time, or from time to time, all acts and things which
Secured Party reasonably deems necessary to protect, preserve or
realize upon the Collateral and Secured Party's Lien therein, in
order to effect the intent of this Security Agreement, all as
fully and effectively as Company might do.
(b) Secured Party agrees that, except upon the occurrence
and during the continuation of an Event of Default which is not
otherwise cured, it will not exercise the power of attorney or any
rights granted to Secured Party pursuant to this Section 5. Subject to
the foregoing sentence, Company hereby ratifies, to the extent permitted
by law, all that said attorneys shall lawfully do or cause to be done by
virtue hereof. The power of attorney granted pursuant to this Section 5
is a power coupled with an interest and shall be irrevocable until the
Secured Obligations are indefeasibly paid in full.
(c) The powers conferred on Secured Party hereunder are
solely to protect Secured Party's interests in the Collateral and shall
not impose any duty upon it to exercise any such powers. Secured Party
shall be accountable only for amounts that it actually receives as a
result of the exercise of such powers and neither it nor any of its
officers, directors, employees or agents shall be responsible to Company
for any act or failure to act, except for its own gross negligence or
willful misconduct.
(d) Company also authorizes Secured Party, at any time and
from time to time upon the occurrence and during the continuation of any
Event of Default which is not cured, to communicate in its own name with
any party to any contract relating to the Collateral with regard to the
assignment of the right, title and interest of Company in and under any
such contract hereunder and other matters relating thereto.
6. Performance by Secured Party of Company's Obligation. If Company
fails to materially perform or comply with any of its agreements contained
herein (and fails to so cure after notice thereof) and Secured Party, as
provided for by the terms of this Security Agreement, shall itself perform or
comply, or otherwise cause performance or compliance, with such agreement, the
reasonable expenses of Secured Party incurred in connection with such
performance or compliance, together with interest thereon at the rate then in
effect in respect of the Advances, shall be payable by Company to Secured Party
on demand and shall constitute Secured Obligations secured hereby.
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7. Events of Default. Except as otherwise expressly
provided under the Notes or this Security Agreement, as the case may be, the
following conditions or events shall constitute an Event of Default:
(a) The rejection, termination or disaffirmance or the
attempted rejection, termination or disaffirmance by Company (or any
person or entity acting on Company's behalf or in Company's place and
stead) of the Notes or this Security Agreement; or
(b) Any representation or warranty which materially
adversely affects the rights of Secured Party in connection with this
Security Agreement or the Notes shall be false in any material respect
on the date as of which made; or
(c) Company shall fail, breach or default in the
performance of any of the Secured Obligations which failure, breach or
default materially adversely affects Secured Party's rights therein
(subject to any additional express cure rights provided for in the
Notes); or
(d) (i) A court having jurisdiction in the premises
shall enter a decree or order for relief in respect of Company
in an involuntary case under any applicable bankruptcy,
insolvency or any other similar law now or hereafter in effect,
which decree or order is not stayed; or any other similar relief
shall be granted under any applicable federal or state law; or
(ii) An involuntary case shall be commenced against
Company under any applicable bankruptcy, insolvency or similar
law now or hereafter in effect; or a decree or order of any
court having jurisdiction in the premises for the appointment of
a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Company or over all or
over a substantial part of its property, shall have been
entered; or there shall have been an involuntary appointment of
an interim receiver, trustee or other custodian of Company for
all or a substantial part of its property; or there shall have
been issued a warrant of attachment, execution or similar
process against any substantial part of the property of Company
and any such event in this clause (ii) shall have continued for
thirty (30) days unless dismissed, bonded or discharged; or
(e) Company shall have an order for relief entered with
respect to it or commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
or shall consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case,
under any such law, or shall consent to the appointment of or taking
possession by a receiver or other custodian for all or a substantial
part of its property; or Company shall make any assignment for the
benefit of creditors; or Company shall fail or be unable or shall admit
in writing its inability to pay its debts as such debts become due; or
the Board of Directors of
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Company (or any committee thereof) shall adopt any resolution or
otherwise authorize any action to approve any of the foregoing; or
(f) Company shall be dissolved or shall file a petition for
dissolution, unless Company's successor executes and delivers to Secured
Party a security agreement substantially similar in all respects to this
Security Agreement.
8. Remedies, Rights Upon Default.
(a) If any Event of Default shall occur and be continuing
and not otherwise timely cured, Secured Party may exercise in addition
to all other rights and remedies granted to it in this Security
Agreement and in any other instrument or agreement securing, evidencing
or relating to the Secured Obligations, all rights and remedies of a
secured party under the UCC. Without limiting the generality of the
foregoing, Company expressly agrees that in any such event Secured
Party, without demand of performance or other demand, advertisement or
notice of any kind (except the notice specified below of time and place
of public or private sale) to or upon Company or any other person (all
and each of which demands, advertisements and/or notices are hereby
expressly waived to the maximum extent permitted by the UCC and other
applicable law), may forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give an option or options to purchase, or sell or
otherwise dispose of and deliver said Collateral (or contract to do so),
or any part thereof, in one or more parcels at public or private sale or
sales, at any exchange or broker's board or at any of Secured Party's
offices or elsewhere at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk.
Secured Party shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or
sales, to purchase the whole or any part of said Collateral so sold,
free of any right or equity of redemption, which equity of redemption
Company hereby releases. Company further agrees, at Secured Party's
request, to assemble the Collateral and make it available to Secured
Party at places which Secured Party shall reasonably select, whether at
Company's premises or elsewhere. Secured Party shall apply the net
proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, as provided in Section 8(d) hereof, Company
remaining liable, as expressly provided in the Notes only, for any
deficiency remaining unpaid after such application, and only after so
paying over such net proceeds and after the payment by Secured Party of
any other amount required by any provision of law, including Section
9-504(1)(c) of the UCC, need Secured Party account for the surplus, if
any, to Company. To the maximum extent permitted by applicable law,
Company waives all claims, damages, and demands against Secured Party
arising out of the repossession, retention or sale of the Collateral
except such as arise out of the gross negligence or wilful misconduct of
Secured Party. Company agrees that Secured Party need not give more
than ten (10) days' notice (which notification shall be deemed given
when mailed or delivered on an overnight basis, postage prepaid,
addressed to Company at its address referred to in Section 12 hereof) of
the time and place of any public
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sale or of the time after which a private sale may take place and that
such notice is reasonable notification of such matters. Company shall
remain liable, as expressly provided in the Notes only, for any
deficiency if the proceeds of any sale or disposition of the Collateral
are insufficient to pay all amounts to which Secured Party is entitled,
Company also being liable, as expressly provided in the Notes only, for
the reasonable fees of any attorneys employed by Secured Party to
collect such deficiency.
(b) Company also agrees to pay all costs of Secured Party,
including, without limitation, reasonable attorneys' fees, incurred in
connection with the enforcement of any of its rights and remedies
hereunder to the extent Secured Party is adjudicated to be entitled to
such enforcement.
(c) Company hereby waives presentment, demand, protest or
any notice (to the maximum extent permitted by applicable law) of any
kind in connection with this Security Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other
realization upon all or any part of the Collateral shall be distributed
by Secured Party in the following order of priorities:
first, to Secured Party in an amount sufficient to pay
in full the reasonable expenses of Secured Party in connection
with such sale, disposition or other realization, including all
expenses, liabilities and advances incurred or made by Secured
Party in connection therewith, including, without limitation,
reasonable attorney's fees;
second, to Secured Party in an amount equal to the then
unpaid principal of and accrued interest and prepayment
premiums, if any, expressly due pursuant to the Notes; and
finally, upon payment in full of all of the obligations
outstanding and expressly due pursuant to the Notes, to pay to
Company, or its representatives or as a court of competent
jurisdiction may direct, any surplus then remaining from such
Proceeds.
9. Limitation on Secured Party's Duty in Respect of
Collateral. Secured Party shall use reasonable care with respect to the
Collateral in its possession or under its control. Secured Party shall not
have any other duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of it or any income thereon or as
to the preservation of rights against prior parties or any other rights
pertaining thereto. Secured Party shall account for any moneys or other
property or rights received by it in respect of any foreclosure on or
disposition of the Collateral.
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10. Reinstatement. This Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by
or against Company for liquidation or reorganization, should Company become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of Company's
assets, and shall continue to be effective or be reinstated, as the case may
be, if at any time payment and performance of the Secured Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount,
or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a "voidable preference", "fraudulent conveyance", or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only
by such amount paid and not so rescinded, reduced, restored or returned.
11. Notices. Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to
give or serve upon any other communication with respect to this Security
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be delivered in person with
receipt acknowledged, or telecopied and confirmed immediately in writing by a
copy mailed by registered or certified mail, return receipt requested, postage
prepaid, addressed as hereafter set forth, or mailed by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
(a) If to Secured Party, at
With a copy to:
(b) If to Company, at
DSL Entertainment Group, Inc.
12300 Wilshire Boulevard, Suite 400
Los Angeles, California 90025
Attn: Mr. Drew Levin
With a copy to:
Kelly & Lytton
1900 Avenue of the Stars, Suite 1450
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Los Angeles, California 90067
Attn: Bruce P. Vann, Esq.
The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every
notice, demand, request, consent, approval, declaration or other
communication hereunder shall be deemed to have been duly given
or served on the date on which personally delivered, with
receipt acknowledged, or the date of the telecopy transmission,
or three (3) Business Days after the same shall have been
deposited in the United States mail. Failure or delay in
delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request,
consent, approval, declaration or other communication.
12. Severability. Any provision of this Security Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
13. No Waiver; Cumulative Remedies. Secured Party shall
not by any act, delay, omission or otherwise be deemed to have waived any of
its rights or remedies hereunder, and no waiver shall be valid unless in
writing, signed by Secured Party and then only to the extent therein set forth.
A waiver by Secured Party of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which Secured Party
would otherwise have had on any future occasion. No failure to exercise nor
any delay in exercising on the part of Secured Party, any right, power or
privilege hereunder, shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or future exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies hereunder provided are cumulative and may
be exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law. None of the terms or provisions of this Security
Agreement may be waived, altered, modified or amended except by an instrument
in writing, duly executed by Secured Party and, where applicable by Company.
For the avoidance of doubt, the foregoing rights and remedies are all subject
to the terms and provisions of the Notes.
14. Successor and Assigns. This Security Agreement and all
obligations of Company hereunder shall be binding upon the successors and
assigns of Company, and shall, together with the rights and remedies of Secured
Party hereunder, inure to the benefit of Secured Party, and all future holders
of instruments or agreements evidencing the Secured Obligations and their
respective successors and assigns. No sales of participation, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing the Secured
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Obligations or any portion thereof or interest therein shall in any manner
affect the security interest granted to Secured Party hereunder.
15. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF
REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. SECURED PARTY AND COMPANY AGREE TO SUBMIT TO PERSONAL JURISDICTION
AND TO WAIVE ANY OBJECTION AS TO VENUE IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA. SERVICE OF PROCESS ON COMPANY OR SECURED PARTY IN ANY ACTION
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT SHALL BE EFFECTIVE IF
MAILED TO SUCH PARTY AT THE ADDRESS LISTED IN SECTION 11 HEREOF AND IN THE
MANNER PROVIDED THEREUNDER. EACH PARTY AGREES NOTHING HEREIN SHALL PRECLUDE
THE OTHER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION.
16. Conflict of Terms. Except as otherwise explicitly
provided in this Security Agreement, a conflict or inconsistency, if any,
between the terms and provisions of this Security Agreement and the terms and
provisions of the Notes shall be controlled by the terms and provisions of the
Notes to the extent of such conflict or inconsistency.
17. Use and Protection of Patent and Trademark Collateral.
Notwithstanding anything to the contrary contained herein, unless an Event of
Default has occurred and is continuing and shall remain uncured, Secured Party
shall from time to time execute and deliver, upon the written request of
Company, any and all instruments, certificates or other documents, in the form
so requested, necessary or appropriate in the judgment of Company to permit
Company to continue to exploit, license, use, enjoy and protect the Patents and
Trademarks relating to the Collateral.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
on the date first set forth above.
DSL ENTERTAINMENT GROUP, INC.
By:
------------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
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Accepted and acknowledged by:
By:_________________________________________________
Name: __________________________________________
Title: __________________________________________
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